♪ ♪ GOOD EVENING WELCOME TO KENTUCKY TONIGHT I'M RENEE SHAW.

THANK YOU VERY MUCH FOR JOINING US.

OUR TOPIC, JOBS, INFLATION AND THE ECONOMY.

AMERICA IS STILL DEALING WITH INFLATION THOUGH IT'S NOT AS BAD AS IT WAS IN THE SUMMER OF 2022 WHEN IT TOPPED 9%.

IT WAS DOWN TO 4 BEHRS IN MAY-- 4% IN MAY.

THAT MEANS YOU ARE PAYING 4% MORE ON AVERAGE FOR GOODS AND SERVICES THAN YOU DID A YEAR AGO.

THE FEDERAL RESERVE BOARD DID NOT RAISE THE KEY INTEREST RATE TWO WEEKS AGO BUT SIGNALED IT COULD RIZ RATES IN THE FUTURE AND THERE IS STILL CONCERN ABOUT THE POSSIBILITY OF A RECESSION.

SO TO DISCUSS ALL THIS AND MORE, WE ARE JOINED IN LEXINGTON BY ASHLI WATTS OF THE KENTUCKY CHAMBER OF COMMERCE, THE PRESIDENT AND C.E.O., JASON BAILEY, EXECUTIVE DIRECTOR OF THE KENTUCKY CENTER FOR ECONOMIC POLICY, JOHN GAREN, AN ECONOMICS PROFESSOR AT THE UNIVERSITY OF KENTUCKY GATTON COLLEGE OF BUSINESS AND ECONOMICS AND CHRIS PHILLIPS, AN ECONOMICS PROFESSOR WITH SOMERSET COMMUNITY COLLEGE.

WELCOME TO ALL OF OUR GUESTS.

THIS AFTERNOON, WE ARE TAPING EARLY, WE ADMIT THAT RIGHT AT THE FRONT, THAT WE ARE TAPING THIS PROGRAM ON WEDNESDAY, JUNE 21.

AND SO WE WELCOME OUR GUESTS.

WE WELCOME YOU THE VIEWERS AT HOME.

WE WILL STILL HAVE A ROBUST DISCUSSION AND LET'S GET STARTED.

LET'S LOOK AT THE STATE ECONOMIC PICTURE.

WE KNOW THAT IN MID JUNE, IT WAS REPORTED THE STATE IS STILL ON TRACK FOR ANOTHER BILLION-DOLLAR SURPLUS BY THE END OF THIS FISCAL YEAR.

THAT IS VASTLY APPROACHING JUNE 30.

DIRECTOR JOHN HICKS SAID THE INCOME TAX REVENUE FELL BY $148 MILLION BECAUSE OF THE INCOME TAX CUTS THAT WENT INTO EFFECT.

SALES TAXES WERE UP BY $40 MILLION.

KENTUCKY CHAMBER WAS VERY INVOLVED IN PERSUADING LAWMAKERS TO REDUCE THE STATE INCOME TAX, GRADUALLY PHASING THAT OUT TO 0 OVER THE COMING YEARS.

WHAT DO YOU TAKE AWAY FROM THESE NUMBERS?

DO YOU THINK THAT'S A VERY POSITIVE PICTURE OF WHERE KENTUCKY IS HEADED?

>> WE DO.

AND I THINK IT'S IMPORTANT TO REMEMBER THAT WHEN WE PASS THE TAX BILL A COUPLE YEARS AGO, HOUSE BILL 8, IT WAS INTENDED TO PHASE OUT THE INCOME TAX.

NO SURPRISE THOSE INCOME TAX REVENUES WILL START DIMINISHING.

WHEN YOU LOOK AT THE BUDGET.

I THINK THE IMPORTANT THING TO NOTE IS THAT THE MAY RECEIPTS WERE $430 MILLION.

THIS IS STILL HIGHER THAN PRE-PANDEMIC, BEFORE THAT BILL WAS PASSED.

IF YOU LOOK BACK IN MAY OF 2019, THOSE INDIVIDUAL INCOME TAX RECEIPTS WERE ABOUT $300 MILLION.

SO EVEN THOUGH THEY HAVE DROPPED, THEY'RE STILL SIGNIFICANTLY MORE THAN WAS PRE-PANDEMIC.

AND I THINK LOOKING AT IT NOW, NOW THAT WE ARE MOVING TOWARD A 4% INCOME TAX WHERE A COUPLE YEARS AGO WE WERE AT 6%, YOU KNOW, THE GOAL OBVIOUSLY UNDER HOUSE BILL 8 IS TO GET TO 0% THROUGH VERY RESPONSIBLE TRIGGERS, TO MAKE SURE THAT WE ARE MEETING OUR GOALS, THAT OUR BUDGET IS GOING TO BE WHOLE.

WE ARE GOING TO BE ABLE TO HAVE THE EDUCATION AND THE ROADS AND BRIDGES AND EVERYTHING THAT THE BUDGET, YOU KNOW, NEEDS TO SUPPLY.

BUT MAKE SURE WE CAN CONTINUE TO LOWER THE INCOME TAX.

SO IT SHOULD REALLY NOT SHOCK NOR SCARE ANYONE THAT THOSE NUMBERS ARE GOING DOWN.

WHAT IS ALSO PROMISING IS THOSE SALES RECEIPT TAXES ARE GOING UP.

AND SO THAT'S REALLY MOVING TOWARD THAT CONSUMPTION-BASED TAX SYSTEM WHICH IS WHAT THE LEGISLATURES LINED OUT IN HOUSE BILL 8.

IT'S REALLY GOING VERY MUCH ACCORDING TO PLAN.

>> Renee: SO JASON BAILEY, I KNOW THERE IS A DIFFERENT INTERPRETATION THAT KENTUCKY CENTER FOR POLICY HAS AND HAVE WRITTEN ON YOUR WEB WEBSITE AND TALK ABOUT HOW THE INDIVIDUAL INCOME TAX IS THE LARGEST REVENUE SOURCE FOR KENTUCKY, PAYS FOR OVER 40% OF THE STATE BUDGET.

DO YOU THINK THAT THERE ARE DIRE DAYS AHEAD IF KENTUCKY CONTINUES DOWN THIS ROAD IF.

>> THIS THEY CONTINUE DOWN THE ROAD EVENTUALLY ELIMINATING THE INCOME TAX, YOU ARE TALKING ABOUT NEARLY HALF OF THE STATE BUDGET THAT PAYS FOR OUR SCHOOLS, OUR HOSPITALS, OUR INFRASTRUCTURE.

THE OTHER THINGS THAT EVERY KENTUCKIAN RELIES.

YOU CANNOT GET RID OF THE KEY CORNERSTONE SOURCE OF FUNDING AND PAY FOR THE THINGS THAT YOU RELY ON.

WE ARE ALREADY SEEING A DROP.

WE HAVE ONLY SEEN A HALF POINT CUT IN THE RATE.

WE ARE SEEING A BIG DROP IN INCOME TAX RECEIPTS AND THAT'S AT THE SAME TIME THAT THE ECONOMY, THE UNDERLYING ECONOMY, NATIONAL ECONOMY IS VERY HOT.

I MEAN UNEMPLOYMENT IS AT A RECORD LOW, INFLATION IS HIGHER THAN IT HAS BEEN IN 40 YEARS.

THOSE THINGS PUSH UP RECEIPTS BUT WE ARE SEEING INCOME TAX RECEIPTS DECLINE.

SO THAT'S THE FIRST GLIMPSE OF FUTURE TROUBLE.

WE ARE GOING TO SEE ANOTHER CUT JANUARY 1 THAT'S BEEN PASSED BY THE LEGISLATURE, HOUSE BILL 1.

WE ARE GOING TO HAVE A TOTAL OF 20% REDUCTION IN OUR LARGEST REVENUE SOURCE.

AND WE WILL FIND OUT IN THE FALL WHETHER THEY WILL CONSIDER ANOTHER CUT THE FOLLOWING YEAR.

SO, YOU KNOW, THIS IS, WHAT THE LEGISLATURE HAS DONE IS CREATE A SITUATION WHERE WE HAVE SOME UNIQUE EXTRA REVENUES, I GUESS, BECAUSE OF THE PANDEMIC AID, THE STIMULUS THAT WAS ROYED PROVIDED.

EVERY STATE, NEARLY EVERY STATE IS EXPERIENCING THESE LARGE REVENUES BUT THEY'RE TEMPORARY.

LEGISLATURE IS USING A TEMPORARY OPPORTUNITY TO MAKE PERMANENT TAX CUTS FOR ALL TIME AND DIMINISHING THE SOURCE THAT'S BEEN WITH US ALMOST 100 YEARS.

WITHOUT A PLAN AND WITHOUT ANY VIABLE OPTIONS TO REPLACE THE REVENUE THAT WE LOST.

IT'S A VERY DANGEROUS PATH.

IT'S ONE NO STATE HAS EVER DONE WITH THE EXCEPTION OF ALASKA AND THEY GOT RID OF THEIR INCOME TAX AFTER THEY STRUCK OIL ON THE BAY.

WE HAVE NOT STRUCK OIL IN KENTUCKY AND WON'T BE DOING THAT.

SO THERE HAS TO BE A PLAN AND THERE IS NOT.

AND SO SORT SHORT OF THAT, WE HAVE TO PROTECT-- I'M HOPING AS EARLY AS THE NEXT SESSION, WE WILL PUT A HALT TO THIS EFFORT.

>> Renee: WE KNOW THE REPUBLICAN CONTROLLED LEGISLATURE THAT HAS EXPANDED IN ITS SUPER MAJORITY SINCE HOUSE BILL 8 EVEN WAS FIRST INSTITUTED, WE DON'T THINK THEY WILL REVERSE COURSE.

THEY SEEM TO BE PRETTY STEADFAST.

>> THEY DID CREATE RULES ABOUT A TRIGGER AND WE DON'T KNOW IF THE TRIGGER WILL BE MET.

>> Renee: THAT'S RIGHT.

>> THERE ARE TWO PARTS TO THE TRIGGER AND ONE OF THEM MAY NOT BE MET THIS YEAR SO TO THEN CUT ANYWAY, I THINK, WOULD BE THE TO MOVE THE GOAL POST THEY ALREADY SET.

>> Renee: I THINK CHAIRMAN PETRI MENTIONED BEFORE AND OTHERS, CHRIS McDANIEL, THAT THE TRIGGERS ARE THERE FOR A REASON, RIGHT?

THOSE ECONOMIC CONDITIONS HAVE TO BE MET BEFORE YOU PULL THE TRIGGER.

QUOTE UNQUOTE.

>> AND WE KNOW THAT UNEMPLOYMENT RATE IS VERY LOW RIGHT NOW BUT THE FEDERAL RESERVE IS PREDICTING A HIGHER UNEMPLOYMENT RATE.

THEY'RE PREDICTING UNEMPLOYMENT RATE THAT WOULD MEAN 1.3 MILLION AMERICANS LOSE THEIR JOB IN THE NEXT YEAR OR SO.

THAT'S GOING TO HIT OUR ECONOMY AND AT THE SAME TIME THAT WE ARE CUTTING TAXES, WHEN WE ARE CREATING A NEW TWO-YEAR BUDGET, IT'S GOING TO BE A PROBLEM.

>> I WOULD ALSO SAY A BILLION-DOLLAR SURPLUS IS HARDLY A CRISIS.

IF YOU THINK ABOUT THIS AND JASON WAS TALKING ABOUT THE AID THAT CAME THROUGH DURING THE PANDEMIC.

AND YES, EVERY STATE HAS EXPERIENCED THIS.

BUT OUR NUMBERS TODAY ARE STILL HIGHER THAN THEY WERE PRE-PANDEMIC BEFORE ANY OF THAT AID CAME IN.

AND SO I THINK WE NEED TO LOOK AT THAT AS WELL.

AND THAT'S THE BEAUTY ABOUT HOUSE BILL 8 AND TRIGGERS THAT OTHERS LIKE NORTH CAROLINA HAVE USED, WE CAN EVALUATE IT.

MAKE SURE OUR BUDGET IS HEALTHY, WE HAVE A HEALTHY RESERVE TRUST FUND BEFORE WE LOWER THE INCOME TAX.

I THINK RIGHT NOW A BILLION-DOLLAR SURPLUS IS A PRETTY GOOD THING TO HAVE.

SO WE'LL SEE WHAT HAPPENS THE REST OF THE YEAR.

BUT I WOULD EXPECT TO HOPEFULLY CONTINUE TO LOWER THE INCOME TAX ANOTHER HALF PERCENT.

>> Renee: I WANT TO GO TO YOU PROFESSOR GAREN BECAUSE ONE OF THE THINGS THAT WAS WRITTEN IS THE COST OF THE STATE WILL RISE FROM AN ESTIMATED $292 MILLION THIS FISCAL YEAR TO 1.28 BILLION IN THE YEAR 2025.

THAT'S OR MORE THAN KENTUCKY SPENDS ON ALL UNIVERSITIES AND COMMUNITY COLLEGES COMBINED.

YOU ARE AT THE UNIVERSITY OF KENTUCKY.

I'M JUST CURIOUS.

ARE YOU CONCERNED?

I KNOW YOU SUPPORT PERHAPS THESE INCOME TAX REDUCTIONS BUT ARE YOU CONCERNED, AS SOMEONE WHO WORKS FOR A PUBLICLY FUNDED INSTITUTION, THAT IT COULD BE IN JEOPARDY DOWN THE ROAD BEYOND 2025?

>> WELL, I'M RETIRED NOW.

SO... [LAUGHTER] >> Renee: SO NO WORRIES, RIGHT?

>> BUT TO ANSWER THE QUESTION IN A MORE SERIOUS WAY, I THINK THE KEY IS THE REVENUE TRILLINGERS, RIGHT-- TRIGGERS?

I THINK THE GOAL IS TO HAVE REVENUE INCREASES WITHOUT, YOU KNOW, THIS REDUCED INCOME TAX.

AND ONCE YOU HAVE ATTAINED THAT, I MEAN PROBLEM SOLVED, RIGHT?

AS LONG AS YOU MAKE THE TRIGGERS AND IF YOU DON'T, THEN YOU DON'T HAVE TO GO THROUGH WITH THE CUT.

SO I DON'T THINK THERE IS-- YOU KNOW, AS LONG AS THE LEGISLATURE WILL HOLD TO THAT, I DON'T SEE THE CONCERN.

>> Renee: ARE YOU CONCERNED, Mr. BAILEY THAT THE LEGISLATURE WON'T HOLD TO THE TRIGGERS BUT THAT'S STATUTORY LANGUAGE THOUGH.

>> THE TRIGGERS IS BASED ON HOW MUCH REVENUE YOU HAVE IN ONE YEAR AND MAKES A PERMANENT CUT.

SO IT'S NOT THAT YOU SUSTAIN THE REVENUE OAF TIME.

IT'S JUST THAT IN ONE YEAR YOU HAVE IT.

THIS IS A VERY UNIQUE TIME IN OUR HISTORY.

TO HAVE UNEMPLOYMENT THIS LOW AND INFLATION THIS HIGH?

IT HASN'T BEEN THIS WAY IF 50 YEARS.

SO IF YOU LOOK BACK, YOU KNOW, DURING THE GREAT RECESSION, THE PERIOD, YOU KNOW, NOT THAT LONG AGO, WHEN UNEMPLOYMENT WAS AT 6, 7, 8, 10% AND IF WE HAD AN INCOME TAX RATE AT 4%, IT WOULD HAVE BEEN MASSIVE-- WE HAD BIG CUTS ANYWAY.

BUT MASSIVE, MASSIVE CUTS.

SO THE TRIGGERS ARE NOT-- THERE IS NO WAY TO GET BACK, CLAW BACK THE TAX CUT IF IT TURNS OUT THAT WE GET A RECESSION.

AND WE WILL HIT A RECESSION.

IT'S A QUESTION OF WHEN, NOT A QUESTION OF IF.

>> Renee: I WANT TO GET TO YOUR THOUGHTS ON THIS ABOUT THE STATE ACTIONS, PROFESSOR PHILLIPS.

AND DO YOU BELIEVE THAT A RECESSION IS INEVITABLE AND HOW DEEP COULD IT BE?

>> IN TERMS OF THE STATE ACTIONS, I'LL AGREE WITH PROFESSOR GAREN THAT THE TRIGGERS ARE WHAT MAKES THE PLAN WORK.

AS LONG AS THEY'RE ADHERED TO.

AND THEN I THINK BACK PRE-COVID TO KANSAS, I SIGH SIMILARITIES THERE.

THEY MADE DRAMATIC STRUCTURAL CHANGES TO THEIR FISCAL HOUSE, NOT EXACTLY WHAT HAPPENED TO KENTUCKY BUT SIMILAR.

HAD TO GO BACK AND RESTRUCTURE THOSE BECAUSE OF THOSE BIG, BIG SHORTFALLS.

AND THE STATE, IF THERE WERE GOING TO BE BIG SHORTFALLS WOULD HAVE TO REVISIT IT, GO BACK, RESTRUCTURE THINGS COMPLETELY.

NOW IT REALLY JUST DEPENDS ON HOW IT WORKS OUT.

>> Renee: AND KANSAS DID HAVE THE TRIGGERS THE FIRST GO AROUND.

>> THEY HAD TO STEP BACK AND DO IT ON THEIR OWN BECAUSE THEY WERE FORCED TO.

BUT THE TRIGGERS IS WHAT MAKES THE PLAN WORK AS LONG AS THEY'LL ADHERE TO THOSE.

NOW NO TERMS OF A RECESSION, WE HAVE BEEN HEARING FOR WHAT, 18 MONTHS, RECESSION, RECESSION.

I THINK ECONOMISTS WIDELY AGREE, WE DON'T KNOW IF A RECESSION IS GOING TO OCCUR.

IT'S GOING TO OCCUR EVENTUALLY.

WE DON'T KNOW WHEN IT IS GOING OCCUR.

IF YOU LOOK AT SOMETHING LIKE THE YIELD CURVE, WHICH HAS MATURITY RATES FOR SHORT-TERM BILLS BEING LOWER THAN LONGER TERM BILLS, IT HAS BEEN INVERTED THE PAST FEW MONTHS.

THAT'S ABOUT ALWAYS BEEN A SIGNAL OF A RECESSION.

IT SEEMS LIKE THOSE SIGNALS ARE OUT THERE FLASHING.

GROWTH HAS BEEN RUNNING ABOUT 2% FOR THE PAST SIX MONTHS.

AND THE FORECAST FOR THE NEXT SIX MONTHS IS ABOUT 2%.

RECORD LOW UNEMPLOYMENT AS WAS JUST MENTIONED, 3.7%.

IT DOESN'T LOOK LIKE A RECESSION IT DOESN'T FEEL LIKE A RECESSION IT FEELS LIKE AN OVERHEATED ECONOMY IF WE SEE THE UNEMPLOYMENT RATE REALLY SPIEBING SPIKING UP 5, 6, 7%.

IT DOESN'T SEEM LIKE THAT'S ANYTHING THAT'S GOING TO HAPPEN IN THE NEAR FUTURE.

>> Renee: WE HAVE HEARD SOME ECONOMISTS SAY YOU WANT UNEMPLOYMENT TO SPIKE UP A LITTLE BIT.

>> THIS IS THE FED'S BALANCING ACT.

THEY HAVE BEEN RAISING RATES.

THEY DIDN'T AT THE BEGINNING A FEW DAYS AGO BUT THEY HAVE BEEN RAISING RATES, RAISING RATES, HOPING TO TAMP DOWN AGGREGATE DEMAND, SLOW THE ECONOMY, SLOW BORROWING AND YES, BRING UNEMPLOYMENT FROM THE 3.7 MAYBE SOMEWHERE IN THE 4.5 TO 5% RANGE AND GET THE INFLATION RANGE BACK TO 2%.

>> Renee: THOSE LOOKING FOR A JOB DOESN'T SOUND LIKE A PROMISING TRAJECTORY.

>> IT'S ALWAYS A TRADE-OFF F. WE GO BACK TO COVID AND WE LOOK AT THE $3 TRILLION PRESIDENT TRUMP THREW AT COVID, THE $3 TRILLION THAT PRESIDENT BIDEN THREW AT COVID, THAT'S $6 TRILLION AND WE DID THAT BECAUSE WE WERE AFRAID OF THE ONGOING DEEP DEPRESSION, ESSENTIALLY.

UNEMPLOYMENT WAS AT 15%.

WE WERE AFRAID IT MIGHT GO HIGHER, AND SO THERE IS ESSENTIALLY A TRADE-OFF.

WHAT WE HAVE TODAY IS ULTRALOW EMPLOYMENT, THE MOST JOBS IN THE RECORD OF AMERICAN HISTORY, 161 MILLION, BUT WE DO HAVE 4% INFLATION WHICH IS HIGHER THAN WE LIKE BUT NOT THE 9% AS YOU MENTIONED WE WERE GOING THROUGH LAST YEAR.

>> INFLATION IS COMING DOWN, AS YOU MENTIONED AGAIN, IT WAS 9% A YEAR AGO, DOWN TO 4% NOW.

IT'S GOING DOWN WITHOUT THE UNEMPLOYMENT RATE GOING UP AT ALL.

SO THE THEORY IS THAT IN RAISING INTEREST RATES, THAT YOU ARE GOING TO WEAKEN THE ECONOMY, LAY PEOPLE OFF AND STOP A POTENTIAL SPIRAL OF INFLATION.

BUT WE DON'T HAVE THAT.

THIS IS NOT A TRADITIONAL INFLATION SITUATION, THEORY, WHERE THE ECONOMY IS OVERHEATING.

WHAT WE HAVE HAD IS THE SHOCK OF A PANDEMIC AND A WAR THAT THEN HAD RIPPLE EFFECTS THROUGHOUT THE ECONOMY, THAT TEMPORARILY INCREASED INFLATION.

BUT THAT INFLATION IS COMING DOWN WITHOUT RAISING UNEMPLOYMENT.

>> Renee: PEOPLE WILL SAY I'M STILL SPENDING MORE THAN $3 AND SOMETHING ON GAS.

MORE THAN DOUBLE FOR MILK AND EGGS.

I DON'T SEE WHERE THE INFLATION NUMBERS ARE GOING DOWN.

THAT'S WHAT THE AVERAGE CONSUMER IS SAYING.

>> REMEMBER WHEN WE PAID $5 FOR GAS A YEAR AGO.

SO IT IS COMING DOWN.

IT IS COMING DOWN SLOWLY.

BUT THE QUESTION IS INFLATION HURTS.

BUT IT SORT OF SHIFTS MONEY FROM SOME PEOPLE TO OTHER PEOPLE.

IF YOU OWN A MORTGAGE, INFLATION ACTUALLY HELPS, IT MAKES YOUR DEBT SMALLER.

IF YOU HAVE A STUDENT LOAN DEBT.

UNEMPLOYMENT, A LOT OF UNEMPLOYMENT HURTS EVERYBODY.

NOT JUST THE PEOPLE WHO LOSE THEIR JOBS, IT HURTS THE MOST AND THAT'S DISPROPORTIONATELY PEOPLE OF COLOR, LOW INCOME PEOPLE, THOSE WITH LESS EDUCATION.

BUT IT HURTS ALL WORKERS IF WE HAVE HIGH EMPLOYMENT BECAUSE WAGES STAGNATE AND THAT'S WHAT HAS HAPPENED FOR MOST OF THE LAST FEW DECADES.

UNEMPLOYMENT HAS HAS BEEN ALLOWED TO BE TOO HIGH AND THAT'S THE REASON THAT WAGES HAVE BEEN STUCK FOR SO MANY PEOPLE.

>> >> Renee: I WANT TO HAVE A CONVERSATION HERE IN A MINUTE ABOUT WAGE GROWTH OR LACK OF WAGE GROWTH.

BUT I WANT TO GO BACK TO WHAT THE STATE HAS BEEN DOING AND YOU MENTIONED, Ms. WATTS AND MAYBE I DID, ABOUT HOW THE SALES TAXES HAVE GONE UP AND WE KNOW THAT PART OF HOUSE BILL 8 AND THE YEAR 2022, CAN I NEVER GET THE YEARS RIGHT.

HELP ME OUT IF I MISSPEAK.

THEY DID EXPAND THE BREADTH OF THE SERVICES THAT COULD BE TAXED.

>> BROADENING THE BASE.

>> Renee: BROADENING THE BASE IS WHAT LIKES TO BE SAID, TO PARKING, MOVING COSTS, MARKETING SERVICES WERE A PART OF THAT BUT THEN THEY CLAWED THAT BACK IN THE RECENT GENERAL ASSEMBLY.

TAXI CABS, THINGS THAT PEOPLE USE EVERY DAY.

AND SO WHAT DOES THE CHAMBER HERE-- AND WE KNOW YOU REPRESENT SMALL AND LARGE BUSINESSES BUT THEY'RE ALSO CONSUMERS.

>> ABSOLUTELY.

IT'S ONE OF THE THUNKS THAT PROBABLY A THEME FOR TONIGHT COULD BE IT'S COMPLICATED.

A THE LOVE THESE THINGS ARE COMPLICATED.

VERY UNUSUAL SITUATION.

JASON MENTIONED WAGE GROWTH BUT HERE IN KENTUCKY WAGES HAVE RISEN 6% YEAR OVER YEAR.

THERE IS WAGE GROWTH IN KENTUCKY BUT THE TWEAKS MADE WITH TAX REFORM, TAX REFORM IS COMPLICATED.

I HAVE BEEN WORKING IN AND AROUND FRANKFORT FOR 20 YEARS.

WE HAVE BEEN TALKING ABOUT IT FOR 20 YEARS.

EVERYONE IS FOR TAX REFORM BUT EVERYBODY'S VERSION IS DIFFERENT.

JASON'S IS DIFFERENT THAN MINE I'M SURE.

EVERY TIME WE TAKE A BITE OF THE APPLE, THINGS HAVE TO BE TWEAKED AND THAT'S WHAT HAPPENS WITH THE LEGISLATE LEGISLATIVE PROCESS THEN HOUSE BILL 8 WAS PASSED AND HOUSE BILL 1 THAT LOWERED THE INCOME TAX AND TOWARD THE END OF SESSION, SOME THINGS WERE CORRECTED WHERE THERE WAS SOME EXPANSION OF TAXES ON SOME SERVICES.

SOME OF THOSE WERE ROLLED BACK AND I REALLY THINK THIS IS JUST GOING TO BECOME WHAT WE ARE GOING TO BE DOING WITH TAX REFORM IS ALWAYS KEEPING OUR FINGER, YOU KNOW, ON THE PULSE OF IT TO MAKE SURE WE CAN MANAGE IT APPROPRIATELY.

LOOKING AT BROADENING THE BASE, WE ARE A MUCH MORE SERVICE BASED ECONOMY THAN WE WERE DECADES AGO WHEN TAX SYSTEM WAS CREATED SO WE DO THINGS NOW THAT WE DIDN'T DO BACK THEN AND MANY STATES, WE LOOK AT TENNESSEE, THEY TAX THINGS EVEN LIKE GROCERIES THAT WE DON'T DO HERE IN KENTUCKY.

EVERYONE'S TAX SYSTEM IS DIFFERENT.

BUT FROM A COMPETITIVE STANDPOINT, I DO THINK WE HAVE TO BE VERY, VERY CAREFUL TAXING THOSE SMALL AND BUSINESSES AND THOSE SERVICE-BASED BUSINESSES, THINGS LIKE TECH, ET CETERA, LIKE YOU SAID.

WHEN WE LOOK AT WHAT THE TAX FOUNDATION, NON-PARTISAN GROUP IN D.C. LOOKS AT, ONE OF THE THINGS THEY LOOK AT IS HOW ARE WE TAXING THESE BUSINESSES?

KENTUCKY RIGHT NOW IS 18, WHICH IS PRETTY GOOD.

WE HAVE RISEN FROM ABOUT, I THINK 36 A COUPLE YEARS AGO.

BUT IF WE CAN CONTINUE TO KIND OF MAKE SURE THAT THAT TAX CODE IS COMPETITIVE, WE'LL CONTINUE TO DROP DOWN AND I THINK ONE IMPORTANT THING TO LOOK AT, TOO, IS I KNOW WE ALL TALK ABOUT THE GOAL BEING ZERO.

THAT WAS LAID OUT IN HOUSE BILL 8.

WE CAN STILL BE A REALLY COMPETITIVE STATE TAX WISE WITHOUT GETTING TO ZERO BY DOING THINGS LIKE ROLLING BACK SOME OF THE TAXES ON BUSINESSES, THE LEGISLATURE DID THIS YEAR.

YOU KNOW, PRODUCING ABOUT 2% OVER THE LAST COUPLE OF YEARS FROM 6 TO 4 IS A HUGE INCREASE FOR OUR COMPETITIVENESS HERE IN KENTUCKY.

SO KNOCKING ON THE DOOR OF A 3% INCOME TAX, NOT RAISING OUR SALES TAX ABOVE 6%, REDUCING SOME OF THE TAXES ON BUSINESSES.

THAT PACKAGED TOGETHER IS GOING TO BE REALLY COMPETITIVE.

>> Renee: AND LOOK WHAT HAPPENED WITH THE BOURBON INDUSTRY, BIG TAX CUT FOR THE BOURBON INDUSTRY.

I'M CURIOUS PROFESSOR, WHY ARE WE SINGLING OUT CERTAIN INDUSTRIES TO GIVE THEM A TAX BREAK WHEN THEY'RE ALREADY BOOMING AND DON'T SEEM TO SHOW EVIDENCE OF NEEDING IT?

>> RIGHT.

I THINK THE BROAD PICTURE OF TAX REFORM IS WHAT YOU WERE SAYING HERE, IS BROADENING THE BASE AND LOWERING THE RATES.

AND SO SOMETIMES THAT DOESN'T HAPPEN ALL AT ONCE.

YOU HAVE YOU KNOW, LITTLE BY LITTLE, YOU BROADEN THE BASE AND YOU KNOW, ELIMINATING TAXES ON STUFF THAT DON'T REALLY FIT INTO THE BASE.

SO IT'S HARD TO GET THIS SWEEPING TAX REFORM ALL AT ONCE AND SO SOMETIMES LITTLE BY LITTLE IS THE WAY IT GOES.

WHICH IS KIND OF UNCOMFORTABLE FOR THOSE OF US WHO ARE NOT IN THE MIDDLE OF THE POLITICAL PROCESS AND NOT USED TO OR DEALING WITH THAT.

BUT THAT'S KIND OF THE WAY IT GOES.

>> Renee: DO YOU THINK CONSUMPTION-BASED TAX SYSTEM IS THE WAY TO GO.

>> YEAH, GENERALLY I THINK IT IS.

THERE ARE SOME ISSUES THERE, AND I GUESS THE BIGGEST ISSUE IS HOW IT MAY HIT THE POOR FOLKS.

BUT THERE ARE WAYS TO DEAL WITH THAT WITHIN THAT CONCEPTION BASED TAX SYSTEM.

>> Renee: IS KENTUCKY EVALUATING HOW THIS MOVE TO CONSUMPTION-BASED TAX SYSTEM MIGHT IMPACT THOSE WHO ARE LOWER ON THE... >> I'M NOT SURE.

>> ONE THING TO CLEAR UP, THE LEGISLATURE HAS NOT BEEN DOING TAX REFORM IN TERMS OF SHIFT FROM ONE TAX TO ANOTHER.

THE NEW SALES TAX ON SERVICES ARE PENNIES.

THE REDUCTION IN THE INCOME TAX RATE IS DOLLARS.

SO WHAT THEY'RE DOING IS BLOWING A HUGE HOLE IN THE BUDGET THAT'S NOT VISIBLE NOW BECAUSE WE HAVE ALL THIS SURPLUS REVENUE BECAUSE AGAIN, THE HISTORICALLY LOW UNEMPLOYMENT RATE, THE HISTORICALLY HIGH INFLATION, THE PANDEMIC STIMULUS THAT'S GOING TO GO AWAY AND WE ARE GOING TO HAVE DIFFERENT ECONOMIC CONDITIONS IN THE FUTURE THAN WE HAVE NOW.

SO THE INCOME TAX IS THE MOST PRODUCTIVE SOURCE THAT WE HAVE IN TERMS OF TRYING TO GENERATE MONEY.

WHY IS THAT?

BECAUSE IT ASKS MORE OF THOSE WHO HAVE MORE AT THE TOP WHOSE INCOMES HAVE BEEN GROWING DRAMATICALLY, THE WEALTHY.

SO WHEN YOU SHIFT TO A SALES TAX, YOU ARE RELYING MORE ON THE POCKETBOOKS OF EVERYDAY PEOPLE, OF LOW INCOME, OF WORKING FAMILIES,-OF-THE-ELDERLY ON FIXED INCOMES AND IT JUST DOESN'T GENERATE ENOUGH.

TO REPLACE, YOU KNOW, WAS WE'VE -- A 1 POINT CUT IN THE INCOME TAX, HAVE YOU TO HAVE THE SALES TAX GO UP FROM 6 TO 7.4%.

THAT'S THE HIGHEST SALES TAX IN THE COUNTRY.

I DON'T THINK THE LEGISLATURE IS GOING TO DO THAT AT THE SAME TIME THEY'RE CUTTING THE INCOME TAX.

TO SAY OOPS, WE CUT TOO MUCH AND WE ARE GOING RAISE TAXES ON EVERYDAY PEOPLE'S POCKETBOOKSES.

I DON'T THINK THEY SHOULD DO THAT.

THAT'S JUST A SHIFT FROM THE WEALTHY TO EVERYBODY ELSE.

>> Renee: PROFESSOR.

>> I WAS GOING TO SAY SOMETHING ELSE ABOUT INFLATION.

WHEN COVID HIT, WE KNOW WE HAD THESE SUPPLY CHAIN PROBLEMS.

MOST OF THOSE HAVE BEEN RESOLVED BY AND LARGE.

WE HAD THE BIG STIMULUS THAT CAME IN.

WE HAD THE PRESSURES PUSHING PRICES UP.

YOU MENTIONED WAGES AND WE KIND OF HAVE THIS WAGE PRICE SPIRAL CONCEPT THAT WE BELIEVE IS PUSHING PRICES UP.

BUT IN THE LAST YEAR OR SO, AT 14, 12 MONTHS, THERE HAS BEEN A LOT OF RESEARCH OUT THERE ON SOMETHING THAT INITIALLY KIND OF IGNORED, DIDN'T THINK MUCH ABOUT.

BUT PROFIT-LED INFLATION.

AND NOW A LOT... >> Renee: WHAT DOES THAT MEAN?

>> LOOKING AT THE IDEA THAT BUSINESSES ARE GETTING HIT WITH COST AND WAGE INCREASES, MAYBE TO THE TUNE OF 2, 3 OR 4% BUT THEY'RE RAISING THEIR PRICES 8 TO SO%.

IT'S JUST THE IDEA THAT BUSINESSES, CORPORATIONS ACROSS THE BOARD, EVEN MOM AND POP CORPORATIONS ARE SAYING, GOSH PRICES ARE GOING UP.

HOW MUCH CAN WE REALLY RAISE PRICES THOUGH TO MAKE MORE AND MORE MONEY?

IT'S A DIFFICULT THING TO KNOW BECAUSE IT'S DIFFICULT TO RESEARCH.

IT'S DIFFICULT-- IT'S SOMETIMES GONE BY AGREED-FLATION.

THERE IS A DIFFERENCE BETWEEN RATIONAL SELF INTEREST AND AGREED.

THE KANSAS CITY FED OUT OUT IN JANUARY, 60% OF THE INCREASE IN INFLATION HAS BEEN DUE TO THE PROFIT-LED INFLATION.

SO IF THAT GOES AWAY, THEN PRICES WILL COME DOWN QUICKLY.

BUT IT'S A DIFFICULT THING TO KIND OF ASCERTAIN, TO KNOW, TO WHAT DEGREE OR ARE BUSINESSES RAISING PRICES BAUGH BECAUSE THEY NEED TO AND WHAT DEGREE ARE THEY THINKING I NEED A NEW BOAT.

I NEED SOMETHING ELSE?

I NEED MORE MONEY?

>> Renee: THE REASON DOESN'T MATTER WHAT IS HAPPENING, RIGHT?

>> HOW DO YOU SORT THOSE THINGS OUT?

>> THAT'S AN IMPORTANT PART.

>> THE CENTRAL AUTHORITIES DON'T HAVE THE INFORMATION TO SORT THESE THINGS OUT.

THESE ARE KNOWLEDGE SPECIFIC OF EVERY BUSINESS AND EVERY ENTREPRENEUR AND EVERY SMALL BUSINESS AND COMPANY.

AND I THINK ULTIMATELY THE ANSWER IS, WE NEED COMPETITION.

AND IF THERE IS ENOUGH COMPETITION, THAT EVENTUALLY WILL SQUEEZE OUT PROFITS AND EXCESS PROFITS, I GUESS.

SO THERE IS NO NEED TO HAVE THIS AND I JUST DON'T THINK THAT'S PRACTICAL.

AND IT HAS BEEN TRIED BEFORE WHERE WE HAVE THESE INCOME POLICIES TO TO LIMIT PRICES IN DIFFERENT SECTORS, BUT IT JUST DOESN'T WORK.

>> LAST TIME WE HAD INFLATION, THE SOURCE OF THIS INFLATION AGAIN WAS THE SHOCKS OF THE PANDEMIC AND A WAR.

AND THE RIPPLE EFFECTS OF THAT, AND ONE OF THOSE IS THAT EXACTLY WHAT CHRIS IS SAYING, COMPANIES WERE ABLE TO TAKE ADVANTAGE OF PRICES ARE GOING UP ANYWAY, RAISING MORE THAN WE HAVE TO.

AND PROFITS HAVE BEEN INITIALLY THEY WERE HALF OF THE PRICE INCREASE.

NOW THEY'RE ABOUT A THIRD OF THE PRICE INCREASE.

SO THE IMPORTANT THING THAT MEANS FOR US NOW IS IT GOES AGAINST THE THEORY THAT WE HAVE A WAGE PRICE SPIRAL.

BECAUSE WAGES ARE NOT DRIVING THIS INFLATION.

IN FACT, WAGES, THEY WENT UP IN 2021 BECAUSE A BUNCH OF PEOPLE GOT LAID OFF AND THEN WHEN THEY WENT BACK TO FIND A NEW JOB, THEY WERE ABLE TO BAGGER-- BARGAIN MORE WITH THEIR EMPLOYER.

THEY JUMPED UP THEN BUT SINCE THEN WAGE GROWTH HAS DECELERATED AND IS NOT WHAT IS DRIVING INFLATION.

IT IS THESE CORPORATE PROFITS SO IF THE FEDERAL RESERVE RAISES INTEREST RATES, ALL THAT-- CONTINUES TO RAISE INTEREST RATES AND THROWS US INTO A RECESSION, IT'S JUST GOING TO HURT WORKERS WHEN WE DON'T HAVE THE RECIPE FOR THE TRADITIONAL CONCERN ABOUT INFLATION THAT YOU ARE NOT ABLE TO GET RID OF.

WE HAVE INFLATION COMING DOWN, AGAIN OVER LAST YEAR SLOWLY.

BUT IT'S COMING DOWN AND WE NEED TO TAKE A WAIT AND SEE APPROACH AS THEE THESE THINGS WORK THEMSELVES OUT.

>> HAVE I TO CHIME IN HERE.

WAGE GROWTH HAS GROWN.

LAST MONTH WE KNOW IT HAS GROWN 6% OVER LAST YEAR AND SO THERE HAS BEEN SIGNIFICANT WAGE GROWTH THAT WE HAVE SEEN.

>> Renee: ARE THERE CERTAIN SECTORS WHERE YOU ARE SEEING THAT.

>> PRETTY MUCH ALL SECTORS ACROSS THE BOARD THERE HAS BEEN WAGE GROWTH AND A LOT OF THAT IS BECAUSE OF OUR WORKFORCE SHORTAGE AND I THINK WE WILL TALK ABOUT THAT AS WELL.

RIGHT NOW WE HAVE TWO OPEN JOBS FOR EVERY ONE PERSON LOOKING.

I DO THINK I WOULD TAKE-- I WOULD DISAGREE WITH JASON ON THE WAGE GROWTH ISSUE.

EVERYTHING IS GETTING MORE EXPENSIVE.

LOGISTICS, BACKLOG FOR GOODS AND SERVICES WE ALL KNOW WHAT THE PANDEMIC HAS CREATED IN TERMS OF BACKLOGS TO BUSINESSES AND COUPLED WITH THAT WORKFORCE ISSUE RIGHT THERE.

THE WAGES HAVE BEEN PRETTY STEADILY INCREASING.

AND I MEAN IT'S JUST RIGHT HERE, 6% SINCE LAST YEAR IS THE AVERAGE WAGE GROWTH.

>> Renee: I THINK SOME PEOPLE WOULD SAY IT'S NOT ENOUGH TO KEEP UP WITH THE RISE IN INFLATION.

>> THE PROFITS ARE THE BIGGER-- >> YOU KNOW, I MEAN THIS IS, I GUESS SHOWS YOU WHAT RECENT EXPERIENCE OVER THE LAST YEAR AND A HALF HAS SHOWN THAT REALLY MUCH OF THE INFLATION IS MONETARY POLICY DRIVEN.

BECAUSE WHAT WE HAD IN 2022, BEGINNING IN LATE 21 IS THE FED MONETIZED ALL THIS BIG SPENDING THAT CHRIS, YOU WERE TALKING ABOUT, BY BASICALLY PURCHASING THE SECURITIES WITH PRINTED MONEY.

AND SO WE HAD A BIG RAMP UP OF INFLATION.

NOW IT'S REELING THAT BACK IN BY RAISING THE SHORT-TERM INTEREST RATES.

AND WHAT WE ARE SEEING IS INFLATION IS RESPONDING.

IS RESPONDING TO THAT SLOWLY.

MONETARY POLICY IS A KEY THING HERE THAT'S DRIVEN THE INFLATION.

NOW REGARDING WAGES, THE IMPORTANT THING TO LOOK AT THERE IS WHAT ECONOMISTS SOMETIMES CALL REAL WAGES, MEANING INFLATION ADJUSTED WAGES.

AND THERE HAVE BEEN SOME SECTORS WHERE THEY'VE GONE UP.

BUT IF YOU LOOK AT THE DATA FOR THIS OVER THE LAST, OVER A YEAR, WAGES HAVE BEEN GOING UP BUT THEY HAVEN'T BEEN KEEPING UP WITH INFLATION.

ON AVERAGE.

NOW THE OTHER THING, ANOTHER THING THAT'S GOING ON IS THAT PRODUCTIVITY BE HAS BEEN GOING DOWN.

AND I THINK THIS IS PARTLY BECAUSE I COUPLE OF THINGS.

ONE IS ENERGY PRICES HAVE GONE UP A LOT, MUCH NEWSCAST-- MUCH FASTER THAN INFLATION.

EVEN NOW THEY'VE GONE DOWN SINCE 2022.

BUT THERE IS STILL SOMETHING LIKE 30% HIGHER THAN THEY WERE IN THE BEGINNING OF 2021.

BUT THE OTHER THING IS, WE'VE HAD SIGNIFICANT AMOUNTS OF REREGULATION COME IN AS WELL.

SO THIS HAS CAUSED PRODUCTIVITY TO GO DOWN.

WHAT HAPPENS FOR FIRMS IS THAT WHEN PRODUCTIVITY ENABLES FIRMS TO GIVE RAISES, AND THAT HAS BEEN GOING DOWN.

NOW INFLATION ENABLES FIRMS TO GIVE RAISES IN DOLLAR TERMS, BUT YOU KNOW, IF THE RAISES ARE NOT AS HIGH AS INFLATION, THEN YOU ARE NOT KEEPING UP IN REAL TERMS.

SO IT'S A LITTLE BIT PARADOXICAL I THINK THAT INFLATION HAS BEEN REELED IN TO SOME EXTENT.

WAS VERY HIGH, BUT THE FACT THAT WAGES HAVE NOT KEPT UP HAS ENABLED COMPANIES TO RETAIN THEIR LABOR FORCE AND NOT LAY OFF A WHOLE BUNCH OF PEOPLE.

>> Renee: MANY COMPANIES ARE STILL LOOKING FOR PEOPLE.

THEY'RE STILL TRYING TO RECRUIT PEOPLE.

WAGES HAVE NOT KEPT UP WITH INFLATION.

SO THEY'RE ABLE TO, YOU KNOW, AFFORD TO HIRE MORE AND MORE PEOPLE AND NOT LAY PEOPLE OFF.

SO NOW IF PRODUCTIVITY CONTINUES TO FALL, THAT IS GOING TO STOP AND SO THAT'S A PROBLEM WE ARE HAVING NOW THAT G.D.P.

GROWTH HAS BEEN KIND OF SKETCHY HERE THE LAST YEAR AND PRODUCTIVITY KEEPS GOING DOWN AND THAT MEANS WAGES ARE GOING TO GO DOWN EVEN FURTHER.

AND THE PRODUCTIVITY SIDE HAS TO DO WITH A LOT OF THE REGULATION AND INFLATION ITSELF IS A DRAG ON PRODUCTIVITY BECAUSE IT TAKES A LOT OF TIME AND EFFORT FOR FIRMS AND INDIVIDUALS TO PLAN FOR INFLATION AND THAT PULLS PEOPLE OUT OF PRODUCING GOODS AND SERVICES.

>> Renee: WHY DO WE HEAR THAT 2% IS THE OPTIMAL RATE OF INFLATION?

WHY THAT NUMBER?

>> WELL, I THINK THAT'S JUST TO GIVE THE FED LIKES TO SAY THAT SO THEY CAN HAVE SOME ROOM TO GO DOWN, RIGHT, IN TERMS OF THEIR INTEREST RATES SO THEY CAN DROP THE INTEREST RATES AND IF THEY NEED TO.

>> Renee: SO WOULD YOU SAY THAT THE INTEREST RATE HIKES THAT WE HAD BEEN EXPERIENCING, EXCEPT FOR THE LAST TIME WHEN THEY CHOSE TO PUT A PAUSE ON THAT, DID DO WHAT IT WAS SUPPOSED TO DO?

>> OH YEAH, THE M2 IS ONE OF THE MEASURES OF MONITORING THE MONEY SUPPLY.

IT HAS BEEN DROPPING FOR THE LAST SEVERAL MONTHS.

THAT'S KIND OF WHAT ULTIMATELY-- I MEAN THERE ARE SOME OTHER FACTORS, BUT ULTIMATELY THAT'S THE BIGGEST CAUSE OF INFLATION OR DISINFLATION.

AND WE SOMETIMES FORGET SINCE THE GREAT RECESSION 09, INFLATION RAN ABOUT 1% OR LESS FOR ABOUT 10 YEARS.

SO HISTORICALLY LOW, LOW BORDERING ON 0 OR EVEN DISINFLATION IN 09 AND A COUPLE MONTHS IN 2015.

AND SOME THEORIES WE HAD PENT UP INFLATION WHERE WE HAD LOW INFLATION FOR SO LONG, PEOPLE DIDN'T SIT BACK AND SAY GOSH, I'M SO HAPPY PRICES ARE SO LOW BUT WE JUST LIVED OUR LIVES AND THEN WE HAD THE PANDEMIC AND PRICES SHOT UP AS A RESPONSE.

>> Renee: THE FEDERAL CHAIRPERSON HAS SAID WE PAUSE ON IT RIGHT NOW BUT BY THE END OF THE YEAR, WE WILL HAVE A COUPLE MORE... >> I THINK WHAT HE WAS SAYING EARLIER TODAY IS THAT THERE IS NO NEED TO DO EVERY MEETING RAISES.

IT SOUNDED LIKE THEY'RE GOING TO RAISE RATES MAYBE EVERY OTHER MEETING FOR A TIME AND THEN WATCH THE DATA AND SEE WHAT HAPPENS.

>> Renee: RIGHT.

>> AND THERE ARE PROBLEMS WITH RAISING INTEREST RATES BEYOND WHAT WE HAVE ALREADY TALKED ABOUT, PEOPLE WILL LOSE THEIR JOBS.

WE HAVE HAD SOME BANKING CRISIS THIS YEAR THAT HAVE TO DO WITH HOW QUICKLY INTEREST RATES HAVE GONE UP.

IT'S A FRAGILE SYSTEM THAT THERE IS RISK OF MOVING TOO FAST AND BREAKING.

I WANT TO RESPOND TO THE IDEA THAT THESE INFLATION CAME FROM THE STIMULUS.

THE INFLATION IS WORLDWIDE.

IT IS HAPPENING IN COMPANIES THAT PROVIDED A-- IN COUNTRIES THAT PROVIDED A LOT OF PANDEMIC AID AND HAPPENING IN COUNTRIES THAT DID NOT PROVIDE PANDEMIC AID.

THE SOURCE OF THE INFLATION WAS THE PANDEMIC ITSELF.

AND THEN FOLLOWED UP BY THE WAR IN UKRAINE.

THE SHOCKS AND RIPPLES APPROACH, I GUESS, DRIVER OF THIS VERSION OF INFLATION.

WHAT WE DID WITH THE PANDEMIC AID IS WE KEPT IT FROM TURNING INTO A DEPRESSION AND WE MADE PEOPLE WHOLE WHILE THEY WENT THROUGH A PERIOD OF EXTENDED JOBLESSNESS, PREVENTED MASS DESPERATION, YOU KNOW, WE CUT THE CHILD POVERTY RATE IN HALF FOR A YEAR.

AND SO IT DID SAY LOT OF GOOD.

AND IT DID ACTUALLY, FOR A VERY TEMPORARY PERIOD, HELP WAGES GO UP FOR ABOUT A YEAR, BECAUSE PEOPLE HAD A LITTLE BIT MORE IN THEIR BANK ACCOUNT WHEN THEY WENT BACK TO LOOK FOR THAT WORK, THEY HAD BEEN LAID OFF FROM THE RESTAURANT JOB AND WENT BACK TO LOOK FOR ANOTHER RESTAURANT JOB AND MAYBE THEY HAD A FEW HUNDRED DOLLARS MORE IN THE BANK THAT ALLOWED THEM TO MAYBE BARGAIN FOR A LITTLE MORE.

AND THAT WAS GREAT BUT THAT WAS ONE TIME AND IT WAS TEMPORARY.

AND THERE IS NOT EVIDENCE THAT WORKERS HAVE THE BARGAINING POWER.

IN FACT, THEY JUST DON'T, TO CONTINUE THOSE WAGES INCREASES OR CREATE A WAGE PRICE SPIRAL.

THE LAST TIME WE HAD REALLY BIG INFLATION IN THE COUNTRY, A QUARTER OF THE WORKERS WERE IN THE UNION AND THE UNIONS HAVE COST OF LIVING ADJUSTMENTS EVERY YEAR.

NOW IT'S ABOUT 6%.

SO WORKERS JUST AREN'T ABLE TO CONTINUE BEYOND THAT ONE-TIME MOMENT TO SORT OF PUSH UP WAGES.

AND WE HAVE UNEMPLOYMENT RATE AT 3.7% AND WE ARE SEEING WAGE GROWTH DECLINE.

AND THAT'S IN THE NUMBERS.

WAGE GROWTH IS ABOUT 4% NOW.

IT'S GOING DOWN.

IT WAS HIGHER A COUPLE YEARS AGO.

SO THERE IS A LOT OF CONCERN THAT WE ARE USING THESE 50-YEAR-OLD MODELS ABOUT INFLATION THAT DON'T FIT AN ECONOMY WHERE THE BOUNCE OF INFLATION WE ARE LIKELY TO HAVE NOW AND IN THE FUTURE ARE MORE LIKELY TO BE DRIVEN BY THESE CRISES, CLIMATE CRISES, THE DISRUPTION OF SUPPLY CHAINS IN THIS CASE WHICH HAPPENED WHEN THE PORTS CLOSED, WHEN, YOU KNOW, THERE IS FLOODS, FIRES, DROUGHTS IN DIFFERENT COUNTRIES THAT CUT OFF SUPPLY FOR A KEY, YOU KNOW, INPUTS FOR VARIOUS PRODUCTS.

THOSE THUNKS PUSH UP INFLATION.

AND THAT'S EXACTLY WHAT HAPPENED IN THIS CASE.

SO WE ARE GOING TO HAVE TO HAVE A DIFFERENT SET OF TOOLS THAN JUST JACKING UP INTEREST RATES WHICH IS A VERY BLUNT AND INDIRECT MEASURE AND AGAIN VERY PAINFUL FOR THE ENTIRE ECONOMY.

>> Renee: Dr. GARREN TALKED ABOUT REGULATION DRIVING UP INFLATION.

PERHAPS HE CAN GIVE US MORE, EXPAND ON WHAT YOU MEAN ON REGULATION AND WHAT SPECIFIC TYPE OF REGULATION CAN YOU PINPOINT THAT CAUSES AN INFLATIONARY SPIKE.

>> A LOT OF IT IS WITH THE ENERGY SECTOR AND ALSO THERE IS A LOT OF DEBATE THESE DAYS ABOUT ENVIRONMENTAL REGULATION AND HOW EFFECTIVE IT HAS BEEN IS IT RISING COSTS AND NOT BENEFIT.

THE SUPREME COURT HAS CHIMED IN ON THE CONSTITUTIONALITY OF IT.

YES, IN FACT, CASEY MULLIGAN, WHO IS NOW A PROFESSOR OF ECONOMICS AT UNIVERSITY OF CHICAGO, HE DID A STUDY BACK I THINK WHEN HE WAS ON THE COUNCIL OF ECONOMIC ADVISERS ABOUT REGULATION AND COSTS, YOU KNOW, COST OF BUSINESS.

AND IT WAS KIND OF DRIVING KIND OF ONE OF THE DRIVERS BEHIND SOME OF THE DEREGULATORY MOVES IN THE TRUMP ADMINISTRATION.

BUT I THINK IF YOU JUST LOOK AT THE NUMBERS OF SPENDING, IT'S GONE WAY UP, OF COURSE.

WE KNOW THAT.

BUT IF YOU LOOK AT THE MONEY SUPPLY, THAT'S GONE WAY UP.

AND THESE ARE, I DON'T KNOW, MAYBE MORE THAN A 50-YEAR-OLD THEORY.

THE MONETARY THEORY OF INFLATION HAS BEEN AROUND FOR A LONG TIME.

AND IT WORKS.

AND I THINK TO DISMISS THAT, I THINK, I DISAGREE WITH JASON ON THAT.

I THINK THAT'S PRETTY KEY.

AND AGAIN, IF YOU JUST LOOK-- EXCUSE ME, AT WHAT HAPPENED IN 2022, THE MONEY SUPPLY, AND BEFORE 2022, AND THEN DURING 2022, IT'S GONE WAY UP AND STARTING TO COME DOWN.

SO THAT TRACKS INFLATION PRETTY WELL.

>> YOU KNOW, I MEAN IT'S HARD TO POINT TO AN EXAMPLE OF REGULATORY POLICY DURING THE TRUMP ADMINISTRATION, WHICH IS WHERE THIS ORIGINATED, THAT WOULD HAVE CAUSED INFLATION.

THAT WAS NOT ON THE AGENDA AT THAT TIME.

ENVIRONMENTAL REGULATIONS WERE NOT ON THE AGENDA.

WHAT DID HAPPEN IS WE WERE HIT WITH A WORLDWIDE PANDEMIC THAT, I MEAN FOLKS NEED TO REMEMBER WHAT HAPPENED AND HOW IT CHANGED PEOPLE, BOTH DEMAND AND SUPPLY.

PEOPLE QUIT BUYING FACE-TO-FACE SERVICES AND THEY BOUGHT GOODS INSTEAD.

SO INSTEAD OF, YOU CANCEL YOUR GYM MEMBERSHIP AND YOU BUY AN EXERCISE MACHINE INSTEAD.

THOSE THINGS VASTLY INCREASED DEMAND FOR GOODS THAT DIDN'T HAVE THE SUPPLY CHAINS IN PLACE TO DO THAT.

AT THE SAME TIME COVID ITSELF SHUT DOWN THOSE SUPPLY CHAINS AND WE HAD PORTS THAT CLOSED, WE HAD, YOU KNOW, SUPPLY THAT COULDN'T BE DELIVERED.

PEOPLE ALSO BOUGHT MORE HOUSING BECAUSE THEY WERE WORKING AT HOME.

AND THEY FIGURED OUT, I NEED A BIGGER HOUSE IF I'M GOING TO BE WORKING FROM HOME, OR, YOU KNOW, YOU ARE A KID LIVING WITH YOUR PARENTS AND YOU ARE LIKE NOW THAT I'M HERE WITH THEM EVERY SINGLE DAY, I THINK I'LL GET MY OWN APARTMENT.

THAT INCREASED DEMAND ON HOUSING AND THE PRICE OF HOUSING WENT UP.

HOUSING IS ABOUT 40% OF CORE INFLATION.

SO IT IS A BIG FACTOR IN PUSHING IT.

AND IT HAD TO DO WITH CHANGES IN PEOPLE'S DEMAND DURING THE PANDEMIC THAT THE SUPPLY CHAIN WAS NOT PREPARED FOR.

SO THOSE ARE THE UNIQUE DISRUPTIONS THAT THIS CRISIS CREATED THAT THEN SPURRED INFLATION.

AND AS WAS ALREADY SAID, SOME OF THE COMPANIES, AND SOME OF THOSE SECTORS TOOK ADVANTAGE OF THAT OPPORTUNITY WHERE PEOPLE SAW THE PRICES WERE GOING UP AND THEY JUST PUSHED THEM UP EVEN MORE TO INCREASE THEIR PROFIT MARGINS AND INCREASE THEIR MARGINS.

AND ALL THOSE THINGS SORT OF ADDED TO A SITUATION.

NOW IT'S COMING DOWN.

AND IT'S COMING DOWN BECAUSE THE SUPPLY CHAIN SNARLS HAVE WORKED THEMSELVES OUT.

THE PORTS HAVE REOPENED.

THERE HAVE BEEN DIFFERENT SUPPLY THAT HAS BEEN BUILT AND DEVELOPED FOR SOME OF THOSE SEMICONDUCTORS, FOR EXAMPLE, YOU KNOW, WE HAD A FIRE AT A SEMICONDUCTOR PLANT IN JAPAN THAT HELPED CONTRIBUTE TO THAT, AND THAT WAS THE BIG THING THAT KEPT US FROM BUILDING NEW CARS FOR A WHILE.

SO THEN YOU SAW THE PRICE OF USED CARS GO UP, RIGHT?

AND THAT'S WORKING ITSELF OUT OVER TIME.

SO THIS IS NOT-- THE TRADITIONAL MODEL OF WHAT CAUSES INFLATION DOESN'T FIT WHAT ACTUALLY HAPPENED WITH A GLOBAL PANDEMIC AND SO THE TOOLS ARE NOT THE BEST TOOLS.

>> YOU KNOW, ONE THING THAT ECONOMISTS LIKE TO SAY IS THAT INFLATION COMES FROM MORE MONEY CHASING THE SAME NUMBER OF GOODS.

BUT YOU KNOW, YOU CAN HAVE THE OTHER THING GOING ON WHERE THE NUMBER OF GOODS FALLS AND THE SAME AMOUNT OF MONEY.

NOW DURING THE PANDEMIC, YEAH, THERE WAS A SHUTDOWN, OF COURSE, OF LOTS AND LOTS OF BUSINESSES AND SO THERE WERE FEWER GOODS AND SERVICES PRODUCED.

SO DURING THAT TIME PERIOD, AND AFTER THAT TIME PERIOD, WE HAD A REDUCTION IN THE AMOUNT OF GOODS AND SERVICES PRODUCED, AND AN INCREASE IN THE AMOUNT OF MONEY.

SO WE HAD MORE MONEY CHASING FEWER GOODS.

THAT DIDN'T SHOW UP RIGHT AWAY.

AND, IN FACT DIDN'T REALLY SHOW UP UNTIL THE ECONOMY MOSTLY RECOVERED.

AND THAT WAS LATE 2021.

SO THE MONEY KEPT GETTING PUMPED INTO THE ECONOMY.

SO WE HAD MOSTLY BACK TO THE SAME NUMBER OF GOODS AS EARLY 2020, BUT MORE AND MORE MONEY.

>> THE MONEY IS COMING OUT OF THE ECONOMY.

THE STIMULUS IS ENDING.

MOST OF IT HAS ALREADY ENDED SO IT'S DISINFLATIONARY NOW.

>> THAT'S THE POINT.

>> BUT IT'S GOING...

GOING AWAY ON ITS OWN.

>> IT WAS DESIGNED TO BE TEMPORARY AND HELP PEOPLE GET THROUGH THE PERIOD AND IT'S GOING AWAY.

SO IT'S NOT CONTRIBUTING-- IT'S NOT CONTINUING TO CONTRIBUTE-- >> WE ARE TALKING ABOUT TWO DIFFERENT THINGS HERE.

ONE IS GOVERNMENT SPENDING AND YOU CAN HAVE INCREASES IN GOVERNMENT SPENDING WITHOUT INFLATION THAT, IF THE FED DOESN'T IMPRINT MORE MONEY, THERE IS GOING DONE MORE MONEY RAISED THROUGH BOPPED SALES OR TAXES, AND GOVERNMENT DECIDES HOW MUCH WHERE IT GETS SPENT.

SO YOU CAN HAVE MORE GOVERNMENT SPENDING WITHOUT MONETARY SURGE.

SO, AND BUT OFTEN TIMES GOVERNMENT SPENDING COMES WITH A MONETARY SURGE WHERE THE FED, EVEN THOUGH IT SAYS IT DOESN'T WANT TO DO THIS, THE FED HELPS IT ALONG BY MONETIZING THE DEBT.

AND THAT'S WHAT WE HAD IN 2021, AND-- 2020 AND 2021 AND THAT SHOWED UP BIG TIME IN 2022.

>> Renee: SO THE ECONOMY FOR ALL OF THOSE YOUNG GRADUATES WHO GRADUATES, YOU KNOW, MAYBE THEY HAVE AN ASSOCIATE'S DEGREE FROM SOMERSET AND WENT TO U.K. AND FINISHED UP AND NOW THEY'RE IN THE WORKFORCE.

I MEAN IS THIS THE IDEAL ECONOMY FOR AN UPSTART, A YOUNG START?

>> THERE ARE JOBS OUT THERE.

THE QUESTION IS LOTS OF JOBS, IS THERE THE JOB?

AND I THINK A LOT OF YOUNG PEOPLE, WHETHER THEY WANT TO OR NOT, HAVE YOU TO SOMETIMES START AT THE BOTTOM.

INSTEAD.

MIDDLE OR THE STOP AND WORK YOUR WAY UP AND SHOW HARD WORK AND SHOW UP AND PRODUCE AND BE PRODUCTIVE AND SHOW YOU HAVE GOOD IDEAS.

AND SOME FOLKS CAN DO THAT AND SOME FOLKS MAY NOT.

SO I THINK IT'S A GOOD WORK ENVIRONMENT JUST BECAUSE THERE IS PLENTY OF JOBS.

WHETHER YOU ARE GOING TO GET THE SALARY YOU WANT, AND LIVE THE LIFE YOU WANT AT 22, PROBABLY NOT.

BUT YOU GOT TO WORK FOR THAT.

YOU GO TO THE WORK FOR THAT UP THE CHAIN.

>> I HAVE SAID THAT OFTEN.

COLLEGE GRADUATES RIGHT NOW, SOMEONE WITH A BACHELOR'S DEGREE STARTING OFF, THERE ARE TWO OPEN JOBS FOR EVERY PERSON LOOKING HERE IN KENTUCKY.

AND IT'S NOT JUST ENTRY LEVEL JOBS OR HOSPITALITY.

IT'S LITERALLY EVERY SINGLE SECTORS.

I TALK TO EMPLOYERS EVERY SINGLE DAY FROM ALL OVER THE STATE, WHETHER IT'S IN HEALTHCARE, EDUCATION, MANUFACTURING, THEY'RE LOOKING FOR ALL SORTS OF EMPLOYEES.

AND SO RIGHT NOW I DO THINK IT VERY MUCH IS THAT JOB SEEKERS' MARKET WHERE EMPLOYERS ARE REALLY, YOU KNOW, FRANKLY DESPERATE FOR EMPLOYEES.

>> Renee: AND WILLING TO PAY MORE.

>> AND WILLING TO PAW MORE AND THAT NATURAL COMPETITION HAS DRIVEN UP THE WAGES.

AND I DO THINK HAVING SOME SKILLS OR SOME TRAINING OR SOME EDUCATION, YOU ARE IN A REALLY GOOD SPOT RIGHT NOW TO LAND, YOU KNOW, A GOOD JOB HERE IN KENTUCKY.

>> MOTIVATED.

BE MOTIVATED.

>> Renee: BUT IF YOU ARE MIDDLE AGED PERHAPS, HOW IS THAT WORKING FOR YOU?

>> I SAID IT'S KIND OF ONE OF THOSE THINGS RIGHT NOW WHERE IT'S ALL HANDS ON DECK.

I THINK WE AS THE CHAMBER HAVE BEEN VERY CREATIVE IN HELPING EMPLOYERS LOOK FOR EMPLOYEES.

WE LOOK AT PEOPLE WHO MAYBE HAVE NOT BEEN IN THE WORKFORCE FOR A PERIOD OF TIME, WHETHER THEY'RE IN RETIREMENT.

WE ARE LOOKING AT-- TODAY I HAD A MEETING WITH DIFFERENT BRANCHES OF THE MILITARY TALKING ABOUT HOW VETERANS CAN TRANSITION INTO THE WORKFORCE ONCE THEY RETIRE FROM THE MILITARY.

WE DO A LOT OF WORK, AS YOU KNOW, AROUND SECOND CHANCE HIRING.

AND SO IT'S REALLY THIS ALL HANDS ON DECK APPROACH BECAUSE WE SIMPLY NEED EVERYONE THAT CAN WORK TO WORK.

>> WE HAVE HAD-- IF YOU LOOK AT THE WAY THE ECONOMY HAS CHANGED IN KENTUCKY AND THE COUNTRY THE PAST FEW DECADES A LOT OF THE JOBS, INCLUDING THE FAST GROWING JOBS ARE LOW WAGE SERVICE SECTORS JOBS.

IF YOU LOOK AT THE FASTEST GROWING JOBS, IT'S IN ELDERCARE, IT'S IN FAST FOOD, IT'S IN HOTEL ACCOMMODATIONS AND RETAIL RELATED JOBS THAT, YOU KNOW,ARE NOT TYPICALLY UNIONIZED.

THEY DON'T PAY VERY MUCH.

WE HAVE ABOUT 20% OF JO BUSINESS THAT PAY LESS THAN $15 AN HOUR.

THERE HAS BEEN SOME WAGE INCREASES AGAIN AT THE BEGINNING OF THE PANDEMIC ONE TIME BUT THEY HAVEN'T, AIS WE SAID MULT MULTIPLE TIMES, THISY HAVE NOT KEPT UP WITH INFLATION WHICH HAS BEEN VERY HIGH.

THERE IS A JOB QUALITY PROBLEM THAT MANY PEOPLE FACE AND THAT'S WHY SO MANY YOU KNOW, SO MANY KENTUCKIANS THAT ARE EMPLOYED ARE STILL STRUGGLING TO MAKE ENDS MEET, ESPECIALLY WITH THE COST OF HOUSING GOING UP IN MANY PARTS OF THE STATE AND THE SCARCITY OF HOUSING, ESPECIALLY IN THE URBAN AREAS AND THE OTHER SORT OF COST OF LIVING CHALLENGES THAT FOLKS MAKE.

SO WE HAVE A LOT OF JOBS AT THE MOMENT, WE DON'T HAVE A LOT OF JOBS OR ENOUGH JOBS TO PAY A LIVING WAGE.

WE DON'T HAVE ENOUGH JOBS THAT ARE-- YOU EVEN SEE THAT, FOR EXAMPLE, RIGHT NOW, THERE IS A MAJOR RENEGOTIATION HAPPENING OVER KENTUCKY'S LARGEST EMPLOYER.

UPS, WHICH IS A UNIONIZED EMPLOYER, PAYS GOOD WAGES FOR FULL-TIME WORKERS, BUT THEY'VE ALSO, LIKE MANY EMPLOYERS, THEY'VE CREATED THE COMPANY HAS CREATED TIERS FOR NEWER WORKERS WHERE THEY MAKE LESS THAN SOMEBODY WHO HAS BEEN ON THERE FOR A LONG TIME.

AND THERE ARE JOB QUALITY ISSUES .

ACCESS TO AIR CONDITIONING.

MANY WORKERS ARE FACING SURVEILLANCE ON THE JOB MORE AND MORE.

SO THOSE ARE THE THINGS THAT PEOPLE ARE LOOKING FOR, TOO.

NOT ONLY IS IT PROVIDING A LIVING WAGE BUT IS IT PROVIDING THE WORKING CONDITIONS THAT MAKE A PERSON HEALTHY AND LIVE A GOOD LIFE.

>> I WOULD SAY COMMENTING ON WHAT JASON SAID, RIGHT NOW THE MAIN HOURLY WAGE IN KENTUCKY IS $25 AN HOUR.

AND SO THERE REALLY ARE JOBS, FROM ALL ENDS OF THE SPECTRUM WHETHER YOU ARE JUST STARTING IN THE JOB MARKET OR YOU ARE A YOUNG WORKER, ALL THE WAY IF YOU HAVE A PROFESSIONAL DEGREE, IT REALLY, WE ARE SEEING THIS WORKFORCE ISSUE IN EVERY SINGLE SECTOR AND EVERY SINGLE LEVEL.

>> ONE THING THE COUNTRY STRUGGLES WITH, WE HAVE ABOUT 100 MILLION INDIVIDUALS THAT ARE NOT IN THE LABOR FORCE.

ABOUT HALF THOSE ARE RETIREES.

WE DON'T EXPECT THOSE TO WORK.

SO AS MANY AS 40 TO 50 MILLION WORKING AGE ADULTS ARE OUT THERE , NOT IN THE LABOR FORCE.

THEY'RE DOING SOMETHING TO GET BY, BUT THEY COULD COME BACK IN AND TAKE SOME OF THESE JOBS.

THAT'S A DIFFICULTY WE FACE.

WHY THEY DROPPED OUT, THE LATEST NUMBER-- >> 57% RIGHT NOW KENTUCKIANS THAT COULD WORK ARE WORKING.

THAT'S OUR WORKFORCE PARTICIPATION RATE.

>> Renee: WHERE DO WE RANK NATIONALLY.

>> BOTTOM 10.

I THINK RIGHT NOW WE ARE AT 42 OR 43.

IT CHANGES EVERY MONTH BUT THE NATIONAL AVERAGE IS 62.6%.

WE ARE SEVERAL PERCENTAGE POINTS DOWN ON WORKFORCE PARTICIPATION WHICH IS THE PEOPLE IN THAT WORKING AGE POPULATION THAT COULD WORK, THAT ARE WORKING.

AND WE CONSISTENTLY RANK IN THE BOTTOM 10.

DURING THE PANDEMIC WE WERE AT THE VERY BOTTOM.

WE HAVE RISEN UP A COUPLE NOTCHES IN THE LAST COUPLE OF YEARS, BUT WE REALLY CANNOT CRACK OUT OF THAT BOTTOM 10.

>> Renee: AND WE TALKED ABOUT CHILD CARE BEING ONE OF THE MAJOR BARRIERS, PARTICULARLY FOR WOMEN, WHO ARE THE PRIMARY CAREGIVERS IN THEIR HOME TRYING TO FIND AFFORDABLE HIGH QUALITY CHILD CARE.

SO UNTIL THAT'S ADDRESSED, PERHAPS THAT WILL BE A DRIVER FOR MORE WORKFORCE PARTICIPATION WHEN MORE PRIMARILY WOMEN CAN GO BACK TO WORK AND NOT PAY THEIR WHOLE PAYCHECK TO DAYCARE.

>> YOU ARE ABSOLUTELY RIGHT.

THE WORKFORCE CRISIS ISSUE, A MYRIAD OF REASONS.

THERE IS NOT ONE SIMPLE SOLUTION.

I WISH THERE WAS.

IT'S A LOT OF THINGS, CHILD CARE IS OBVIOUSLY SOMETHING THE CHAMBER HAS CARED ABOUT THE LAST SEVERAL YEARS AND WE HAVE HELPED PASS LEGISLATION AROUND THAT AND SPEAKING OF WOMEN IN THE WORKFORCE, I LOOK AT A LOT OF DATA AROUND THAT AND YOU KNOW, WOMEN WERE MORE NEGATIVELY AFFECTED WITH THE PANDEMIC IN TERMS OF BEING UNEMPLOYED OR HAVING TO STAY HOME.

UNFORTUNATELY A LOT OF THAT BURDEN OF HOME SCHOOLING YOUR CHILDREN AND DOING THE VIRTUAL SCHOOLING FELL TO WOMEN.

A LOT OF THE HOSPITALITY WORKERS WHERE THEY WERE CLOSED DOWN, WHETHER YOU WERE IN RESTAURANTS OR HOTELS, FALL TO WOMEN AS WELL.

THE GOOD NEWS IS THAT WOMEN, OUR NUMBERS IN KENTUCKY, WOMEN HAVE GOTTEN BACK INTO THE WORKFORCE.

THE BAD PART IS THAT WE ARE NOT SEEING THAT SAME KIND OF WAGE GROWTH AS IN TERMS OF MEN OR UPWARD MOBILITY.

AND SO IT'S TAKING WOMEN A LITTLE LONGER TO GET BACK INTO THE WORKFORCE THAN IT DID MEN POST PANDEMIC.

>> I WANT TO... >> THAT STATISTIC IS THROWN AROUND A LOT.

>> Renee: WHICH STATISTIC.

>> 57% OF WORKING AGE PEOPLE IN THE WORKFORCE MUCH THAT'S NOT TRUE.

THAT'S PEOPLE 16 AND OLDER.

SO YOU ARE TALKING ABOUT 98 YEAR OLDS, YOU ARE TALKING ABOUT 84 YEAR OLDS.

IF YOU LOOK AT THE WORKING AGE POPULATION, WHAT IS CALLED THE PRIME WORKING POPULATION BETWEEN THE AGES OF 25-54, 79% OF THE PEOPLE IN KENTUCKY IN THAT AGE GROUP ARE IN THE WORKFORCE.

79%.

IN THE NATION IT'S 82.

SO WE ARE A LITTLE BEHIND.

BUT NOT MUCH.

THE REMAINDER OF THOSE PEOPLE-- SO ROUGHLY 20% OF PEOPLE NOT IN THE WORKFORCE, THEY'RE CAREGIVERS, THEY HAVE A DISABILITY, OR THEY'RE IN SCHOOL.

THE VAST MAJORITY OF THEM.

THERE IS ONLY A SMALL PERCENTAGE THAT WE CAN'T PUT IN ONE OF THOSE CATEGORIES.

SO, YOU KNOW, GENERALLY PEOPLE ARE WORKING.

THERE IS NOT THESE HIDDEN POTS OF MONEY YOU CAN GO AND RELY ON UNLESS YOU COME FROM A WEALTHY FAMILY.

AND NOT BE IN THE WORKFORCE HERE IN KENTUCKY.

PEOPLE ARE WORKING, THEY'RE STRUGGLING TO MAKE ENDS MEET.

SO I WANT THAT STATISTIC TO BE CLARIFIED BECAUSE IT'S ALWAYS STATED AND IT'S ALWAYS STATED INCORRECTLY.

NEARLY HALF OF THE PEOPLE NOT WORKING IS JUST-- THAT'S JUST FALSE.

NOW, FOR THOSE PEOPLE WHO DO HAVE BARRIERS, AND YOU LISTED A GREAT ONE, LIKE THE CAREGIVERS WHO WOULD LIKE TO HAVE EMPLOYMENT BUT JUST CAN'T AFFORD CHILD CARE, WE SHOULD REMOVE THEM.

AND I WILL POINT TO CHILD CARE SPECIFICALLY BECAUSE IT'S VERY IMPORTANT TO UNDERSTAND THAT THE CHILD CARE INDUSTRY HAS BEEN PROPPED UP BY FEDERAL PANDEMIC AID THE LAST FEW YEARS, ABOUT $300 MILLION A YEAR IN FEDERAL PANDEMIC AID.

IT'S INCREASED THE WAGES OF THESE LOW PAID CHILD CARE WORKERS.

IT'S INCREASED, MADE IT MORE AFFORDABLE FOR PEOPLE TO GO.

IT'S HELPED UPGRADE THE FACILITIES.

AND IT RUNS OUT VERY, VERY SOON.

SO WITH ALREADY HALF OF KENTUCKIANS LIVING IN A CHILD CARE DESERT, THIS IS A VERY BIG ISSUE FOR THE 24 LEGISLATIVE SESSION, IS IN THIS, ALL THIS SURPLUS MONEY IN THE RAINY DAY FUND SET ASIDE RIGHT NOW, IS THE LEGISLATURE GOING TO TAKE SOME OF THAT STATE MONEY AND PREVENT THERE FROM BEING A CLIFF THAT THESE CHILD CARE CENTERS FACE?

I THINK THAT'S A HUGE ISSUE.

>> CAN I CHIME IN AND JUST DIVE A LITTLE DEEPER TO WHAT JASON SAID ABOUT THE PRIME AGE WORKFORCE PARTICIPATION.

HE IS RIGHT.

79% RIGHT NOW IS OUR PRIME AGE WORKFORCE PARTICIPATION RATE BUT IT'S LOWER THAN IN 2019.

WE WERE AT 79.5.

IT IS LOWER BE THE NATIONAL AVERAGE OF 82.4 BUT THE MOST IMPORTANT THING I THINK TO REMEMBER IS THAT THOSE NUMBERS ARE OBVIOUSLY HIGHER THAN THAT WORKFORCE PARTICIPATION RATE OF 57%, I THINK IS WHAT I SAID.

BUT WE ARE STILL IN THE BOTTOM 10 IN TERMS OF PRIME AGE WORKING.

SO WE ARE STILL IN THE BOTTOM 10, MORE THAN 40 STATES ARE STILL DOING BETTER IN THAT STATISTIC THAN WE ARE AS WELL.

SO THOSE NUMBERS ARE CORRECT, BUT WE ARE IN THE BOTTOM 10 AS WELL.

>> I WOULD LIKE TO COMMENT ON SEVERAL THINGS THAT HAVE COME UP HERE.

I THINK YOU GO PRE-PANDEMIC, THAT WE HAD A SITUATION WHERE A LOW WAGE WORKERS WERE EXPERIENCING QUITE SUBSTANTIAL WAGE GAINS AND OUTSTRIPPED INFLATION.

THIS IS SEVERAL YEARS PRIOR TO THE PANDEMIC.

AND INFLATION WAS VERY LOW, OF COURSE, LIKE 1 OR 2%.

BUT REAL WAGES WERE GOING UP.

INFLATION ADJUSTED WAGES WERE GOING UP FOR ALL WAGE BIG CATEGORIES.

BUT ESPECIALLY AT THE LOW END.

AND THE REASON FOR THAT IS WE HAD SOME SUBSTANTIAL ECONOMIC GROWTH AND PRODUCTIVITY GROWTH WAS GROWING UP.

BUT I THINK THAT THIS WAS A TIME WHEN, IF YOU RECALL SOME OF THE NEWS STORIES AND THERE IS PROBABLY DATA ON THIS AS WELL, WHERE EMPLOYERS ARE REALLY TRYING TO FIND, LIKE THE SECOND CHANCE WORKERS, OR TRYING TO FIND PEOPLE WHO HAVE MAYBE HAVE BEEN MARGINALLY CONNECTED TO THE LABOR FORCE, MAYBE NEEDED CHILD CARE ASSISTANCE, LET'S GET YOU IN.

WE GOT A JOB FOR YOU.

NOW THE BEAUTY OF THAT IS BECAUSE THAT WAS DUE TO PRODUCTIVITY GROWTH.

SOME OF IT, OF COURSE THE STABLE MONETARY POLICY.

REDUCTIONS IN TAXES, FRAMEWORK WHERE THERE WAS SOME DEREGULATION GOING ON.

THAT SPURRED PRODUCTIVITY GROWTH, WHICH AFFECTS WAGES OF EVEN THE LOW INCOME WORKERS.

SO HERE WE HAVE A SITUATION, KIND OF LIKE THE BEST POVERTY PROGRAM IMAGINABLE BECAUSE IT DOESN'T COME OUT OF ANYBODY'S POCKET.

THIS COMES OUT OF JUST RAISING PRODUCTIVITY.

NOW SOME OF THE JOBS LOW INCOME JOBS ARE NOT THAT GREAT OF JOBS.

I MEAN WE HAVE ALL BEEN THERE, RIGHT?

IT'S NOT ALWAYS THAT GREAT.

BUT FOR SOMEONE YOUNG, YOU KNOW, THAT'S WHERE YOU START.

AND IF YOU'VE GOT AN EMPLOYER, WHO IS READY TO HIRE YOU, WANTS TO TRAIN YOU AND WILL WORK WITH YOU, MAN, THAT'S THE TICKET.

THAT'S THE KIND OF ECONOMIC GROWTH THAT WORKS FOR LOW INCOME AS WELL AS OTHER FOLKS.

>> AND MAYBE IT'S NOT ALWAYS THE MONETARY BENEFIT.

MAYBE IT'S THE ABILITY TO SAY YOU CAN WORK FROM HOME THREE DAYS A WEEK.

REDEFINING WHAT THE WORK ENVIRONMENT LOOKS LIKE.

>> THAT'S WHAT I WAS GOING TO CHIME IN.

WE WERE TALKING ABOUT WAGES AND I THINK ABIMPORTANT PART OF THE EMPLOYMENT CONVERSATION IS THE CREATIVITY THAT EMPLOYERS HAVE HAD THE LAST COUPLE OF YEARS.

WE WORK MUCH DIFFERENTLY THAN WE WORKED A COUPLE YEARS AGO.

IT'S FLEXIBILITY.

HELPING TO PAY FOR CHILD CARE, TUITION ASSISTANCE.

I KNOW SOME EMPLOYERS OFFER PET INSURANCE.

IT'S ALL OF THESE THINGS THAT EMPLOYERS ARE DOING TO REALLY GET CREATIVE TO COMPETE IN THIS JOB MARKET.

>> Renee: DO THEY MONETIZE THAT TOTAL COMPENSATION PACKAGE AND SAY WELL YEAH, YOUR BASE SALARY MIGHT BE $35K BUT WHEN WE GIVE IT TO YOU, IT'S WORTH WHATEVER IT'S WORTH.

>> I WAS GOING SAY SOMETHING ABOUT PERCEPTIONS WHAT IS GOING ON IN THE ECONOMY.

WE CAN LOOK AT THESE NUMBERS AND WE CAN AGREE MOSTLY ON THE NUMBERS.

BUT THE ECONOMY SEEMS TO BE DOING PRETTY WELL OVERALL.

WE KNOW THE INFLATION, WE BATTED BACK AND FORTH.

BUT BECAUSE OUR POLITICAL ECONOMIC DIVIDE IS SO VAST TODAY , IT REALLY DEPENDS UPON YOUR POLITICAL PERSUASION, HOW YOU EVEN VIEW THE ECONOMY.

IF YOU LOOK AT THE POLLING IN THAT.

IF YOU GO BACK AND LOOK AT 2020 DURING THE ELECTION, I PULLED UP THOSE NUMBERS.

JIB WAN 525 COUNTIES AND PRESIDENT TRUMP WON 2500 COUNTIES.

ALMOST 2600.

BUT ABOUT 70% OF THE G.D.P.

COMES OUT OF THOSE 500 COUNTIES THAT JOE BIDEN WON.

SO IF YOU LOOK AT ECONOMIC GROWTH AND WHERE IT IS CENTERED, IT IS REALLY CENTERED IN THE METROPOLITAN HUBS AROUND THE COUNTRY, LIKE FAYETTE COUNTY, JEFFERSON COUNTY, AND THAT'S WHERE MOST OF THE ECONOMIC GROWTH HAS TAKEN PLACE.

AND IF YOU LOOK OUT IN THOSE RURAL COUNTIES, THE RED COUNTIES, IT SEEMS LIKE THAT FOLKS ARE A LITTLE BIT MORE PESSIMISTIC ABOUT THE FUTURE BECAUSE THEY RELY MORE ON TRAVEL AND GASOLINE AND WE KNOW ENERGY PRICES HAVE GONE UP.

MAYBE THEY RELY MORE ON, YOU KNOW, STAPLE FOOD ITEMS AND WE KNOW GROCERIES HAVE GONE UP AND IN THE INTERURBAN AREA, MAYBE YOU DON'T RELY ON YOUR CAR SO MUCH OR ON, YOU KNOW ERIK WOO-- OR WEEKLY GROCERY BILLS.

A LOT OF IT COMES BACK TO EVEN OUR POLITICS DETERMINES OUR VIEW OF THE ECONOMY.

AND IT'S SORT OF STRANGE THAT IT WORKS OUT THAT WAY.

>> Renee: THAT'S A GOOD POINT.

>> I WANT TO CONNECT A COUPLE OF THINGS THAT WERE SAID BECAUSE THERE IS A VERY URBAN-RURAL ELEMENT TO OUR LABOR FORCE PARTICIPATION RATE.

WE ARE IN THE BOTTOM 10 IN THAT STATISTIC.

WE ARE IN THE BOTTOM 10 IN EVERY STATISTIC.

BUT IF YOU LOOK AT IT GEOGRAPHICALLY, WHERE WE ARE IN LEXINGTON AND THE GOLDEN TRIANGLE IN BOWLING GREEN, THE URBAN PARTS OF THE STATE, YOU KNOW, OUR LABOR FORCE PARTICIPATION RATE IS VERY GOOD.

IT'S ABOVE AVERAGE.

BUT THE STATEWIDE RATE GETS PULLED DOWN BECAUSE PARTICULARLY IN THE RURAL AREAS, AND THE MORE REMOTE AREAS IN EASTERN KENTUCKY WHERE SO MANY JOBS HAVE BEEN LOST, THE LABOR FORCE PARTICIPATION RATE IS MUCH LOWER, HIGHER LEVELS OF DISABILITY, MORE PEOPLE WILL HAVE BLACK LUNG DISEASE, ALL KINDS OF BARRIERS AND THERE ARE FAR FEWER JOBS.

I MEAN WE HAVE A 3.8% UNEMPLOYMENT RATE STATEWIDE IN KENTUCKY.

IT'S HIGHER THAN THAT IN MARTIN COUNTY AND THOSE AREAS HAVE BEEN HIT BY FLOODING, MOST RECENTLY, AND THERE JUST AREN'T TWO JOB OPENINGS FOR EVERY JOB IN THOSE COUNTIES.

THERE ARE NOT A LOT OF JOBS.

THE SCHOOL SYSTEM IS THE LARGEST EMPLOYER.

THE HOSPITAL IS AN IMPORTANT EMPLOYER, BOTH OF WHICH, BY THE WAY, DEPEND ON STATE REVENUES FROM THE INCOME TAX.

BUT THERE ARE NOT A LOT OF JOBS, AND THERE ARE MORE PEOPLE WORKING FAR MORE PEOPLE WORKING AT DOLLAR GENERAL THAN THERE ARE COAL MINERS SO YOU USED TO HAVE THESE UNION JOBS THAT PAID GOOD WAGES.

>> MULTIPLE JOBS.

>> THEY DON'T EXIST ANYMORE.

AND PEOPLE WORKING AT DOLLAR GENERAL, THEY'RE NOT 22 YEAR OLDS ON THEIR WAY UP THE CAREER LADDER.

MANY OF THEM ARE ADULTS, OLDER PEOPLE.

THEY HAVE WORKED THESE JOBS THEIR ON WHOLE LIFE AND STRUGGLED THEIR WHOLE LIVES AT IT.

IT'S BECOME AN ECONOMIC REALITY FOR MANY PEOPLE AND I THINK WE NEED TO BE DOING MORE TO CREATE JOBS IN THE PLACES WHERE PEOPLE LIVE AND ULTIMATELY THAT'S GOING TO REQUIRE, I THINK, MORE PUBLIC INVESTMENT BECAUSE THE EFFORTS TO ATTRACT A LOT OF, YOU KNOW, MANUFACTURERS THERE HAVE NOT BEEN SUCCESSFUL.

>> Renee: SO QUICKLY TO YOU MISS WATTS ABOUT CHILD CARE.

WILL WE SEE THE KENTUCKY CHAMBER PUSH FOR FURTHER LEGISLATION TO HELP PARTICULARLY PERHAPS EVEN WOMEN WHO WERE DISPLACED OUT OF THE WORKFORCE, TO GET BACK IN?

AND WHAT KIND OF INCENTIVES ARES ARE YOU THINKING ABOUT.

>> WE ARE GOING TO CONTINUE TO ADVOCATE FOR CHILD CARE LEGISLATION.

YOU KNOW, WE HELPED PASS THE BILL A COUPLE YEARS AGO THAT SET UP THAT CHILD CARE ASSISTANCE PROGRAM WHERE AN EMPLOYER CAN PUT MONEY INTO SOMEONE WHO NEED CHILD CARE ASSISTANCE AND THE STATE MATCHES IT 100%.

THAT IS LIVE RIGHT NOW.

SO EVERY EMPLOYER SHOULD GO AND CHECK THAT OUT.

SO RIGHT NOW WE ARE LOOKING AT KIND OF THE REGULATORY ENVIRONMENT.

HOW IS IT EASIER TO PROVIDE CHILD CARE, ALL OF THAT, I THINK EVERYTHING RIGHT NOW IS ON THE TABLE BECAUSE I THINK TO JASON'S POINT, THAT FEDERAL SUBSIDY, THAT ASSISTANCE CANS IS GOING TO RUN OUT IN THE NEXT COUPLE OF MONTHS.

WE KNOW CHILD CARE LOCATIONS CLOSING THROUGHOUT THE STATE.

THERE ARE AREAS IN THE STATE WHERE THERE ARE CHILD CARE DESERTS SO IT'S A REALLY BIG ISSUE.

JASON, WE AGREE ON THIS ONE HOPEFULLY WE CAN WORK TOGETHER THIS NEXT SESSION AND GET SOMETHING DONE ON CHILD CARE.

>> Renee: WE'LL HAVE THAT AS A TOP TICK I'M SURE.

WE THANK YOU VERY MUCH FOR JOINING US TONIGHT MAKE SURE YOU JOIN US EACH NIGHT 6:30 EASTERN 5:30 CENTRAL AND BILL BRYANT WILL BE HERE WITH A TEAM OF WORKING JOURNALISTS TO DISCUSS THE NEWS OF THE WEEK ON COMMENT ON KENTUCKY FRIDAY.

I'M RENEE SHAW.

THANK YOU FOR WATCHING AND HAVE A GREAT NIGHT.